UK shares exposed to the domestic economy surged on Friday after Prime Minister Boris Johnson’s ruling Conservative Party won a solid majority, assuring markets that Britain is likely to be headed for an orderly exit from the European Union.
The FTSE 100 index rose 1.8% as a rally in utilities, retailers, housebuilders and banking stocks offset the drag from sterling, which surged to 19-month high against the U.S. dollar.
Housebuilders soared 10% with Taylor Wimpey, Persimmon and Berkeley all reaching record highs and topping the blue-chip index.
The FTSE 250 index, home to many companies with high UK exposure, surged as much as 5.2% to record highs.
More than a day’s average daily volume had gone through on the FTSE 100 index within the first two hours after open.
Stocks were benefiting from the Conservative victory and reports of a preliminary trade deal between China and the U.S., said Emmanuel Cau, head of European equity strategy at Barclays.
“The banking sector, real estate, construction, utilities, all these sectors are expected to benefit from the ‘feel-good’ factor”.
Johnson’s poll victory also lifted nationalisation fears hanging over utility stocks, boosting National Grid and United Utilities, both of which rose more than 7%. Opposition Labour leader Jeremy Corbyn had announced plans to nationalise utilities in his election manifesto.
Corbyn said he on Friday he would step down as Labour leader . The change in the party’s leadership is likely to be the biggest factor driving banks and utilities higher, by affirming nationalisation is now “off the table”, said Citi analyst Andrew Coombs.
Among financials, RBS, Virgin Money and Lloyds stood out rising 10% to 16%.
JPMorgan’s basket of London-listed companies that make their cash in domestic markets rose 7% on Friday to record highs.
“I think there has been a huge ‘underweight’ on UK assets and we are seeing it unwind,” said Kasper Elmgreen, head of equities at asset manager Amundi. “UK domestics are attractively priced and there is more way to go.” ($1 = 0.7794 pounds)